Page 646 - Auditing Standards

As of December 15, 2017

Example D: Comments on Pro Forma Financial Information

5. Example D is applicable when the accountants are asked to comment on (a) whether the pro forma
financial information included in a registration statement complies as to form in all material respects with the

applicable accounting requirements of rule 11-02 of Regulation S-X, and (b) the application of pro forma
adjustments to historical amounts in the compilation of the pro forma financial information (see paragraphs
.42 and .43). The material in this example is intended to be inserted between paragraphs 6 and 7 in example

A. The accountants have audited the December 31, 19X5, financial statements and have conducted an AS
4105 review of the March 31, 19X6, interim financial information of the acquiring company. Other accountants
conducted a review of the March 31, 19X6, interim financial information of XYZ Company, the company being

acquired. The example assumes that the accountants have not previously reported on the pro forma financial
information. If the accountants did previously report on the pro forma financial information, they may refer in
the introductory paragraph of the comfort letter to the fact that they have issued a report, and the report may
be attached to the comfort letter (see paragraph .29). In that circumstance, therefore, the procedures in 7b(i)

and 7c ordinarily would not be performed, and the accountants should not separately comment on the
application of pro forma adjustments to historical financial information, since that assurance is encompassed
in the accountants' report on pro forma financial information. The accountants may, however, agree to

comment on compliance as to form with the applicable accounting requirements of rule 11-02 of Regulation
S-X.

7. At your request, we have—

a. Read the unaudited pro forma condensed consolidated balance sheet as of March 31, 19X6, and
the unaudited pro forma condensed consolidated statements of income for the year ended
December 31, 19X5, and the three-month period ended March 31, 19X6, included in the

registration statement.

b. Inquired of certain officials of the company and of XYZ Company (the company being acquired)
who have responsibility for financial and accounting matters about—

(i) The basis for their determination of the pro forma adjustments, and

(ii) Whether the unaudited pro forma condensed consolidated financial statements referred to

in 7a comply as to form in all material respects with the applicable accounting
requirements of rule 11-02 of Regulation S-X.

c. Proved the arithmetic accuracy of the application of the pro forma adjustments to the historical
amounts in the unaudited pro forma condensed consolidated financial statements.

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